Division 3
Liability Insurance
Subdivision 1
General Provisions
- 510. Definition of liability insurance
In liability insurance, the insurer shall, in place of the policyholder, perform the obligation to compensate for damage caused by the policyholder to a third party (injured party) as the result of an insured event which occurs during the period of validity of the insurance, and to cover the costs of legal assistance.
- 511. Covering costs of legal assistance
(1) Insurance shall cover the costs of legal assistance incurred by a policyholder against whom a claim is filed to the extent that the policyholder could consider such costs necessary to protect the rights of the policyholder in court and extra-judicially, even if the claim proves to be unfounded.
(2) Insurance shall also cover costs incurred for the protection of the interests of the policyholder in criminal proceedings or administrative court proceedings if the facts established in the course of the proceedings may constitute a basis for the civil liability of the policyholder with respect to the injured party, insofar as such costs are incurred according to the insurer’s instructions. The insurer shall cover the costs in advance at the request of the policyholder.
(3) If the sum insured is agreed upon, the insurer shall cover the costs incurred in relation to a court action which the insurer requested from or recommended to the policyholder and the costs of defence specified in subsection (2) of this section even if such costs together with the rest of the indemnity exceed the sum insured. The same shall apply to interest payable for a delay initiated by the insurer in the satisfaction of a claim of the injured party.
(4) If the policyholder has the right to avoid compulsory execution of a court decision by providing security or depositing money, the insurer shall, at the request of the policyholder, provide security for the compulsory execution or deposit money up to the extent of the sum insured and, in the case specified in subsection (3) of this section, in addition to the extent of costs related to the court action. The insurer shall be released from the obligation to provide security or deposit money if the insurer admits that the claim of the injured party against the policyholder is justified.
[RT I 2008, 59, 330 – entry into force 01.01.2009]
- 512. Insurance of liability arising from economic activities
(1) Insurance of the liability arising from a policyholder’s economic activities covers the liability of persons employed for service or hired by representatives of the policyholder and the policyholder to manage an enterprise or a part thereof or to exercise supervision over an enterprise.
(2) If an enterprise is transferred or use thereof is granted to another person, the policyholder’s rights and obligations arising from the contract shall transfer to the transferee, unless such rights and obligations are related to the period of time prior to the transfer or grant of use. The provisions of subsections 494 (2) and (3) of this Act and §§ 495 to 497 of this Act shall apply accordingly.
- 513. Release of insurer from performance obligation
An insurer shall be released from its performance obligation if the policyholder intentionally and unlawfully caused the occurrence of the event due to which the liability of the policyholder with respect to the injured party arises.
- 514. Notification of circumstances
(1) A policyholder shall notify the insurer of circumstances which may result in the occurrence of an insured event and of a claim being filed against the policyholder by an injured party within one week as of the time when the policyholder became aware of the circumstances or the claim being filed.
(2) Sending the notice within the term specified in subsection (1) of this section shall suffice to make it timely.
(3) The policyholder shall immediately notify the insurer of the initiation of judicial or other proceedings against the policyholder which may result in the liability of the insurer and of circumstances which may constitute the basis for a claim being filed against the policyholder.
- 515. Payment of indemnity
(1) The insurer must pay the indemnity without delay but not later than within two weeks as of the satisfaction of the claim of the injured party by the policyholder or as of the claim being established by a court decision, admission of the claim or a compromise agreement. If costs are to be compensated for pursuant to § 511 of this Act, the insurer shall cover the costs within two weeks as of being notified of the total size of the costs.
[RT I 2008, 59, 330 – entry into force 01.01.2009]
(2) Any agreement between the insurer and policyholder is void if, under the agreement, the insurer is to be released from the performance obligation if the policyholder satisfies the claim of the injured party or admits such claim without the consent of the insurer if, given the interests of the injured party, failure to satisfy or admit such claim is clearly contrary to the principles of good faith.
- 516. Payments by instalment
If the policyholder is to pay the injured party in instalments and if the sum insured is less than the estimated total size of the instalments, the policyholder may only demand the corresponding part of the payments by instalment from the insurer.
- 517. Rights of injured party
(1) The insurer has the right to pay the indemnity directly to the injured party if:
1) the amount payable by the policyholder to the injured party is determined by a court decision or a compromise agreement, and
[RT I 2008, 59, 330 – entry into force 01.01.2009]
2) the insurer informs the policyholder of its intention in advance.
(2) The insurer shall pay the indemnity directly to the injured party if the policyholder so requests.
(3) Disposal of a claim of the policyholder against the insurer is void with respect to the injured party. The same shall apply to the disposal of a claim in execution proceedings or if the claim is disposed of in order to secure an action.
(4) If the circumstances which caused the policyholder’s liability result in claims from several injured parties and the total size of such claims exceeds the sum insured, the insurer shall satisfy the claims in proportion to the size of the claims.
- 518. Rights of injured party upon bankruptcy of policyholder
Upon the bankruptcy of a policyholder, an injured party has the right to satisfy a claim against the policyholder at the expense of a claim for compensation against the insurer before the other obligees of the policyholder.
- 519. Cancellation of contract after occurrence of insured event
(1) Either party may cancel a liability insurance contract if, after the occurrence of an insured event, the insurer has admitted its obligation to compensate the policyholder or has refused to compensate after the indemnity became collectable.
(2) A contract may be cancelled within one month after the admission of the obligation to compensate or refusal to compensate. The provisions of § 493 of this Act shall also apply.
Subdivision 2
Obligatory Liability Insurance
- 520. Duty to enter into contract
An insurer shall enter into a liability insurance contract required by law (obligatory liability insurance) if the policyholder meets the requirements prescribed in the standard terms.
[RT I 2002, 53, 336 – entry into force 01.07.2002]
- 521. Claim for compensation of damage of injured party
(1) An injured party may demand the compensation of damage caused thereto by the policyholder from both the policyholder and the insurer. Compensation for damage may be requested from the insurer only in monetary form.
(2) If a claim for the compensation of damage is filed against both the policyholder and the insurer, they shall be liable as solidary obligors. In the relationship between the insurer and the policyholder, only the insurer shall be liable. If the insurer is released from its performance obligation, only the policyholder shall be liable for performance of the obligation in the relationship between the insurer and the policyholder.
(3) The insurer may present the same objections against the claim of an injured party as the policyholder.
(4) The claim of an injured party against an insurer shall expire after the same term as a claim against a policyholder. Suspension or interruption of the limitation period with respect to the policyholder shall also apply to the insurer and vice versa.
(5) The insurer shall not refuse to satisfy the claim of an injured party on the grounds that the insurer has been released from its liability to the policyholder in part or in full.
(6) [Repealed – RT I 2008, 59, 330 – entry into force 01.01.2009]
(7) [Repealed – RT I 2003, 78, 523 – entry into force 27.12.2003]
(8) Upon the imposition of the excess of a policyholder provided for in an insurance contract, the insurer shall indemnify the injured party for the loss in full and the policyholder shall pay the excess to the insurer.
[RT I, 07.07.2015, 1 – entry into force 01.01.2016]
- 522. Notification obligation of injured party
(1) An injured party shall notify the insurer within two weeks as of becoming aware of the insurer and in a format which can be reproduced in writing of an insured event and of the filing of a claim against the policyholder and shall notify the insurer immediately of the filing of an action against the policyholder.
(2) The insurer may request information necessary to determine the cause and extent of damage from the injured party. The injured party shall provide information only insofar as it is reasonable to expect that such information can be obtained from the injured party.
[RT I 2002, 53, 336 – entry into force 01.07.2002]
- 523. Violation of obligation by injured party
(1) If an injured party fails to give notice in a timely manner of an insured event or the filing of an action against the policyholder or violates the obligation specified in subsection 522 (2) of this Act, the insurer shall not be liable for the compensation of damage to an extent exceeding the liability of the insurer had the insurer been notified of the insured event or the filing of an action in a timely manner.
(2) If the obligation specified in subsection 522 (2) of this section is violated, the insurer may rely on the provisions of subsection (1) of this section only if the injured party has been expressly informed of the consequences of the violation beforehand in a format which can be reproduced in writing.
(3) The restriction on the liability of the insurer provided for in subsection (1) of this section shall apply accordingly if the policyholder enters into compromise agreement with an injured party or admits the claim of an injured party without the consent of the insurer. The restriction on the liability of the insurer shall not apply if, given the interests of the injured party, entry into the compromise agreement or failure to admit the claim would clearly be contrary to the principles of good faith.
[RT I 2002, 53, 336 – entry into force 01.07.2002]
- 524. Transfer of insurance contract
(1) In the event of obligatory insurance of a liability which may arise from a thing and if the right of ownership of the thing is transferred, the policyholder’s rights and obligations arising from the insurance contract transfer to the acquirer of the thing. The provisions of §§ 494 to 498 of this Act apply accordingly.
(2) If, in the case specified in subsection (1) of this section, the acquirer of the thing enters into a new obligatory liability insurance contract, the insurance contract which transferred to the acquirer shall expire.
- 525. Limitation of release from performance
(1) If, upon the insurance of insured risk relating to a third party, the insurer is released from its performance obligation with respect to the policyholder, the insurer shall only be released from its performance obligation with respect to the third party if the circumstances which are the basis for such release arise from the third party or if the third party was or should have been aware of these circumstances.
(2) If the insurer has to perform its obligation with respect to a third party under the circumstances specified in subsection (1) of this section, the insurer may, upon performance of the obligation with respect to the third party, demand that the policyholder compensate any expenses incurred in order to perform the obligation.